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Monday, 17 December 2012

Point of Decision

For a number of reasons equities are at important point of decision here. Any lower and equities will most likely fall significantly further, but if they reverse here we should see a retest of the recent highs and possibly a lot more than that.

On ES I posted a decent declining resistance trendline from the high on Friday. ES was showing some positive RSI divergence at the close on Friday and then gapped above that declining resistance trendline at the Globex open. Since then ES has been retesting broken resistance and the 1410 level of the penultimate low last week. There is a possible downsloping IHS forming with a target in the 1427 area on a break over 1415.5, and while 1410 ES holds this is an unambiguously short term bullish looking setup:
In terms of support on the SPX daily chart the close on Friday was slightly below the 1415 area at the 50 and 100 DMAs. The daily lower bollinger band is now at 1407 not far below and there is also support there:
On the weekly chart the close was five points below the weekly middle bollinger band at 1419. A little weak, but while SPX holds this area on a weekly close basis the odds favor the bulls for the next move. If there is a break down from here then the next important support is in the 1385-90 area, with the 200 DMA at 1387, and the weekly lower bollinger band then at 1368:
On NDX the bullish IHS has now been seriously weakened as this retracement has undercut the right shoulder. I won't be relying on this pattern for a target. There is still significant support in this area however and we could be seeing a (less) bullish rectangle form if we see a reversal here. NDX has broken slightly under the double-top valley low but when double-top patterns fail, that is generally where they fail. If NDX makes a conviction break below the double-top target will be in the 2550 area:
On AAPL we are seeing the retest of the November lows. There is some short term positive RSI divergence, and a reversal here would set up a very nice potential double-bottom with a target in the 680-5 area on a break over 595. A break lower would suggest a move to the 470s next however:
Vix reached the daily upper bollinger band on Friday. Again a very possible reversal area, though I have possible triangle resistance somewhat higher at 18.8:
EURUSD showed a lot of strength breaking up through the bearish looking reversal setup on Friday morning. A short term rising channel has now been established within the larger rising channel and EURUSD could hit resistance on both in the 1.3225 area today. I would be looking for a significant reversal to most likely retest the 1.30 area from there:
Hard to call today, but as long as these support areas on ES, NDX and AAPL hold, I'm leaning bullish. The setup I am seeing on ES this morning will generally resolve bullishly, and if ES can get over 1415.5 I'll be looking for a move back into the 1420s and a possible retest of the highs. I'm disappointed however that my lovely NDX IHS has been getting mangled, there are a number of possible IHS patterns around that chartists have been looking at, but in my view it was the only decent one, and there is no longer a decent quality bull pattern pointing back to the September highs in my opinion.

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